This article is part of the MDM series: The Shifting Competitive Landscape.
To expand the products it could sell without the expense of carrying inventory, San Antonio-based Labatt Food Service collaborated with Ace Mart, a restaurant equipment and supplies distributor. This case study looks at how the two approached the collaboration and the challenges that have gone with it. It also looks at a second collaboration Labatt has built with other distributors to serve customers that have moved to geographic areas it does not serve.
Restaurant equipment and supplies distributor Ace Mart’s original relationship with San Antonio, TX-based Labatt Food Service was as a traditional supplier and an occasional provider of special-order items. About six years ago, Ace Mart, which is based primarily online, proposed a way to simplify how customers can order Ace Mart products through Labatt.
Labatt’s customers are now able to browse and select Ace Mart items through Labatt’s online catalog, consolidating their orders from the two distributors.
Labatt Food Service President Blair Labatt says this enables his company to offer customers a wider array of products “without us actually having to stock those products and be in that business. We’ve outsourced it,” he says. Ace Mart primarily sells restaurant equipment and supplies, which complements Labatt’s foodservice offerings.
The alliance helps Labatt be more competitive with larger distributors without incurring the expense of carrying more products. Ace Mart picks and ships each order placed on the shared site directly to Labatt, who through an “in-and-out” cross-docking system delivers the products to customers.
Labatt says it makes sense to use a business that is a specialist to be able to offer more products, but the alliance formed between the two companies hasn’t been without its challenges. Labatt says orders that incorporate Ace Mart products tend to have a higher level of returns, which has increased Labatt’s handling costs. “That’s the biggest difficulty in doing it … so that’s something we’ve had to monitor really closely,” he says.
There were also challenges to establishing systems that worked for both companies. “Getting something like that off the ground is an IT issue more than anything else,” Labatt says. “You’ve got to get the two software systems to work together.” Labatt gives Ace Mart credit for committing substantial resources toward the development of the system.
Whether a similar alliance could work for other companies is, Labatt says, “the classic question of whether a distributor should grow by expanding product lines, by vertically integrating or by outsourcing.”
For companies considering an alliance, Labatt says “there needs to be a top-to-top contact, but there also need to be multi-strand relationships to make sure things stay on course day-to-day.” An Ace Mart representative works at Labatt essentially full-time, and other workers at all levels are in “continuous contact.”
The rapport between business leaders is also a key ingredient. “All of that is essential to any supplier ‘marriage,’ if you like, particularly if it’s a close one like this.”
In a separate alliance, Labatt collaborates with other distributors to meet customers’ needs nationwide. When a customer expands to a new region that Labatt doesn’t serve, the distributor connects with a distributor in that region to serve the account.
Though Labatt doesn’t take a cut of partners’ profits serving the same accounts, the distributor says it benefits because the move helps retain customers.
To police pricing among distributors delivering to the same accounts, Labatt helped create Distribunet. The software enables Labatt to line up distributors with common items and pricing for customers that extend outside of Labatt’s geographic reach, and to set and monitor the pricing they offer.
“Instead of us trying to be a national firm and build bricks and mortar all over the country, we’ve basically done it virtually with other independent companies that we don’t own,” he says.
Distributor partner programs facilitated by Labatt involve as many as 10 different independent distribution companies and span as many as 25 states.